Nasdaq Hits New Record as Earnings, Greece Relief Lift Stocks
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U.S. equity markets posted gains Thursday after the Greek parliament approved austerity measures in exchange for financial aid, and as traders digested second-quarter results from Netflix (NASDAQ:NFLX), Goldman Sachs (NYSE:GS) and Citigroup (NYSE:C).
The Dow Jones Industrial Average rose 70 points, or 0.39% to 18120. The S&P 500 rose 16 points, or 0.8% to 2124, while the Nasdaq Composite added 64 points, or 1.26% to 5163 the 7th record close of 2015.
Nine of ten S&P sectors were higher, led by utilities, consumer staples and telecom. Materials was the only sector in the red, down about 0.03%.
Today’s markets
In the early morning hours of the day, Greece approved a round of fresh austerity measures, including pension reform and tax increases that cleared the way for the debt-laden nation to receive bailout funding agreed to by the eurozone last week.
On the heels of the vote, the Eurogroup released a statement later in the morning announcing it “welcomes” the adoption of the initial bailout terms by the Greek parliament, and said it agreed in principle to three-year financial assistance to the nation.
Further, in a press conference, European Central Bank President Mario Draghi said the ECB would increase its emergency liquidity assistance to the nation by 900 million euros over one week. He added that the central bank operates under the assumption that Greece is and will continue to remain the in the euro.
The moves ease concerns across the world of a Greek exit from the eurozone. However, Joshua Mahony, market analyst at IG, wrote in a note that while the vote gives the Greeks a reprieve and allow the nation to reopen its banks and the economy to return to normal, there are still fundamental problems that have to be solved.
“The IMF’s decision to finally stray from the Troika in calling out the issues surrounding debt sustainability were warranted, and there will be no long-term way out of this debt spiral without some form of debt write-down,” he noted.
Still, European markets cheered the move. The Euro Stoxx 50, which tracks large-cap companies in the eurozone, jumped 1.49% to 3677. Meanwhile, the German Dax closed 1.53% higher, the French CAC 40 was 1.77% higher, while the UK’s FTSE 100 rose 0.63%.
In the U.S., stocks got an extra boost after Federal Reserve Chief Janet Yellen told lawmakers that the central bank will raise interest rates in a “prudent and gradual manner.” Yellen has said she still sees a “likely” scenario for liftoff this year.
It was Yellen’s second day on Capitol Hill for her semi-annual testimony to Congress on monetary policy. Thursday’s visit to the Senate Banking Committee follows an appearance in front of the House Financial Services Committee on Wednesday, which, at times, allowed for a heated question-and-answer session.
Leading up to Yellen’s trip to Capitol Hill on Thursday, Mahony warned investors not to expect any more clarity on the rate-hike landscape.
“Ms. Yellen yet again reiterated that we will see a hike this year, but also emphasized the importance of the size and speed of a hike rather than its timing. Ultimately, monetary tightening will always seem like walking on eggshells, and I expect it to be slow-paced and moderate in size regardless of whether it starts in September or later this year,” he wrote.
As investors awaited the start of Yellen’s hearing on the Hill, they parsed a round of data thanks to a full economic calendar. Weekly jobless claims fell more than expected last week to 281,000 from a downwardly revised 296,000 the week prior. Wall Street expected claims to fall to 281,000 from an initially reported 297,000.
A reading on mid-Atlantic manufacturing activity from the Philadelphia Federal Reserve showed factory activity continued to expand, but as a much slower rate than forecast. The gauge dropped to 5.7 in July from 15.2 the month prior. Wall Street was looking for a shallower fall to 12.
The latest read on homebuilder sentiment from the National Association of Home Builders showed confidence held steady for the month of July. The NAHB’s gauge remained unchanged at 60 for the month.
Second-quarter earnings season rolled on with two of the nation’s biggest banks reporting results ahead of the opening bell.
Shares of Goldman Sachs came under pressure after the company reported second-quarter results that were dented by litigation costs and lower trading revenue. Litigation provisions cut the U.S.’s biggest investment bank’s profits nearly in half, EPS came in at $1.98. Excluding those costs, profits per share were $4.75. Analysts were looking for $3.89 a share. Revenue, meanwhile, came in at $9.07 billion, beating Wall Street expectations for $8.78 billion.
Citigroup shares soared on the back of its second-quarter results released before the opening bell, which showed the bank booked its highest profit in eight years. The nation’s third-largest bank by assets unveiled profits per share of $1.45 excluding credit and debt valuations adjustments as well as expenses from a mortgage settlement from the year ago period. The results came in above Wall Street expectations for $1.34 a share. Meanwhile, revenue excluding CVA/DVA came in at $19.2 billion, also topping Street views for $19.12 billion.
EBay (NASDAQ:EBAY), meanwhile, reported adjusted second-quarter profits per share of 76 cents, topping views for 72 cents. The e-commerce giant also said it would spin off its enterprise business to a consortium led by private equity firm Permira for $925 million. Including the enterprise unit, eBay revealed revenue of $4.65 billion, beating expectations for $4.49 billion. Revenue excluding enterprise came in at $4.38 billion.
Elsewhere in the world, in Asia, where growth concerns persist, China’s Shanghai Composite index added 0.46% to 3823. Hong Kong’s Hang Seng ticked up 0.43% to 25162, while Japan’s Nikkei rose 0.67% to 20600.
In currencies, the euro fell 0.68% against the U.S. dollar. The yield on the benchmark 10-year U.S. Treasury note rose 0.002 of a percentage point to 2.35%. Bond yields move in the opposite direction of prices.
In commodities, U.S. crude oil futures erased earlier gains and declined 1% to $50.91 a barrel. Brent, the international benchmark, was trading 0.2% lower to $57.01 a barrel. Gold prices declined 0.3% to $1,143 a troy ounce.